Owning a home is the American dream.   However so many of us are on the verge of homelessness…and we don’t even realize it.

The American housing bubble that wreaked havoc on our global economy continues to linger even today. The toxic combination of slow wage growth and skyrocketing house prices has put buying out the question for many Americans, forcing them to rent.

In today’s episode, we’re going to explore (and expose) why this is, and what you need to do to protect yourself financially.

Here Are The Show Highlights:

– The fundamental cause of racial disparity and the shocking reason why the housing crisis is much worse for black families ([6:30])

– The long-term effects of the burst housing bubble and what you need to do to protect yourself financially ([7:50])

– Why millions of millennials can’t buy homes (and why you need to make a fortune to afford even an average home in many American States) ([9:45])

– Why you could be closer to homelessness than you think and how you can prevent it ([14:00])

Here is the link to the ‘Out of Reach Report’ mentioned in this episode: https://nlihc.org/oor.


Remember to download Grandma’s Top Tips by dropping into grandmaswealthwisdom.com/toptips. Time-honored wealth strategies served with a helping of balance and trust.

If you’d like to see how Grandma’s timeless wealth strategies can work in your life, schedule your free 15-minute coffee chat with us by visiting https://www.grandmaswealthwisdom.com/call…just like Grandma would want us to do.


Read Full Transcript

A hearty welcome to Grandma’s Wealth Wisdom with your hospitable hosts, Brandon and Amanda Neely. This is the only podcast for strategies to grow your wealth simply and sustainably like grandma used to. Without further ado here are your hosts.

Brandon: Hey. I'm Brandon, and welcome to Grandma's Wealth Wisdom, where we work with you to build wealth grandma would be proud of.

Amanda: And I'm Amanda. With this episode, we're starting a series of episodes under the theme of "On the Verge of…" or ellipses.

Brandon: Of what? Ellipses?

Amanda: Ellipses. It's what it's called.

Brandon: Oh, okay. Got you.

Amanda: The dot, dot, dot. Okay. Each episode will stand independently so you don’t have to listen to every episode to get the point.

Brandon: Although we know you love this podcast, so you're probably going to listen to every episode, right?

Amanda: Right, right. But we're going to be starting with some gloomier topics, but we're going to end with some more positive ones. [0:01:04.4] So, stick with us through the whole series, so you can get to that positive part. Today, we're going to be talking about housing. Yes, housing can be a gloomier topic for many. We'll explain soon. First, Brandon wants to read another 5-star review.

Brandon: Awesome. Thanks, Amanda for letting me read this review. So this review comes from JeepAbout and as you guys know, reviews are really helpful and really helps build up the podcast and listeners so we want to let you guys know about all the amazing reviews we're getting. So, it comes from JeepAbout, and he says ---

Amanda: Or she.

Brandon: Or she. "To Know or Not to Know" is the title, and it says, " I like Amanda and Brandon's podcasts because they give simple examples of real life situations, even if Brandon add a few extra characters in the stories.," which I did in "Tale of Two Grandma's" podcast, so I did add those extra characters for fun. [0:02:06.8]

Amanda: Go back to the review, though.

Brandon: So, back to the review. "They informed me that, an annuity will continue to pay the holder even after their principle is depleted. Really? An annuity will do that? WOW! They shared that with a whole life policy I will know how much money I have available each and every year from now until the policy is cashed in. I have to continue paying my premiums of course, and while I am paying premiums the value only goes up, I don't know if my brokerage account will continue to go up, in December the value actually went down. I'm getting close to retirement and I don't want another 20, 30, 40% or more drop in my retirement, I want to know that as I get closer to retirement my retirement money growing. [0:03:01.3] Thank you, Amanda and Brandon, for sharing your knowledge with me."

Amanda: Thank you, JeepAbout, for your review, and as Brandon was mentioning, reviews are super helpful. They help us know that we're making an impact, and they help the podcast reach more people. So, we decided that we are not beyond bribing you to leave a review. Here's the deal. If you write an honest 5-star review, we'll share it on the podcast plus if you take a picture of your review and send it to hello@grandmaswealthwisdom.com, we will send you a copy of the bestselling book by Pamela Yellen, The Bank on Yourself Revolution.

Brandon: And JeepAbout is going to get that book.

Amanda: Right. As long as you're in the US, we will send you a copy in the mail or the Kindle version, your choice. So write an honest 5-star review and send it to hello@grandmaswealthwisdom.com, and you'll get the book for free.

Brandon: Awesome. That's a sweet deal. Okay, now on the topic of this episode," On the Verge Of … Home." [0:04:02.4] So, grandma knew how to create a sense of home. When you walk into grandma's house, there was solid furniture, made out of real wood. Maybe she had a cup of tea for you or some really good coffee and some fresh-baked cookies. Grandma's house is a predictable refuge for Thanksgiving every year or when you need an ear to listen to. In more ways than one, we have lost that today, and it's not just because of IKEA furniture, which we have some of that, IKEA furniture.

Amanda: And it pains Brandon that we have some IKEA furniture.

Brandon: I can't wait to get rid of some of that.

Amanda: It's not that bad, but it's not grandma's furniture.

Brandon: Yeah. It's not grandma's. It's not like a bedroom set that was …

Amanda: Brandon's grandmother's.

Brandon: Yep.

Amanda: Yep.

Brandon: For one, we move more often now and live farther from where we grew up in our globalized world, but mostly, we have lost a sense of home because more people are renting instead of buying. [0:05:08.6]

Amanda: Right. I was doing a whole bunch of research for this episode and I came across this Pew Research Center analysis of Census Bureau Housing Data. It doesn't sound very exciting, but there are some really interesting things here. They said there that more US households are headed by renters than at any point since at least 1965, and they saw that this increase in renters is most significant in people under 44, if you just look at the last 10 years. They were looking at 2006 to 2016. So, for example, if you're under 35, in 2006, 57% of people under 35 were renting and in 2016, 65% were renting. That's an increase of 8 percentage points. And then for those between 35 and 44, rental rates increased from 31% in 2006 to 41% in 2016. [0:06:06.4] That's a 10-percentage point increase.

Brandon: Another way to look at it is that about two thirds of those under 35 are renting and four out of ten between 35 and 44 are renting.

Amanda: And that’s' the most since 1965, at least.

Brandon: Yeah, exactly.

Amanda: In terms of a percentage of the population, and besides age differences, we want to be really clear that there are also differences based on race and ethnicity. Housing is a great place to look if you're looking for the effects of racial discrimination in America. Racial disparity in housing is a serious matter and it's increasing, rather than decreasing. It's super serious, so we wanted to make sure we point that out too. That it's not just a thing that's impacting people of different ages, but also, something that impacts people of different racial and ethnic backgrounds. [0:07:00.2]

Brandon: Absolutely. Finally, the Pew Research Center gets to what we think is the most critical thing here regardless of age or ethnicity. The increase in US renters over the past decade does not necessarily mean that homeownership is undesirable to today's renters. Indeed, 72% of renters said they would like to buy a house at some point. About two thirds of renters in the same survey, 65%, said they currently rent as a result of circumstances, compared with 32% who said they rent as a matter of choice. When asked about the specific reasons why they rent, the majority of renters, especially nonwhites, cited financial reasons.

Amanda: So, here’s the bottom line. The effects of the housing bubble that burst are real and continue to linger, even today. [0:07:59.5] Fewer and fewer of us are able to purchase a home, so we stay as renters. And you know, when we look at like what are the reasons why, you know with the dip in housing prices after the bubble burst, we have to believe it's not because houses are more expensive than they were 10 years ago. Although in some cases they are. There has to be a different reason why more and more of us are unable to purchase homes and this is what the Pew Research found - that it's "financial reasons, "and so we started to ask ourselves, what are these financial reasons that are cited in the Pew Research.

Brandon: To look for these financial reasons, we need to look at this group called "The National Low Income Housing Coalition." Each year, they publish their report called Out of Reach. The Out of Reach report documents the gap between renters' wages and the cost of rental housing. The report's housing wage is the hourly wage a full-time worker must earn in order to afford a modest rental home without spending more than 30% of his or her income on housing costs. [0:09:14.1]
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Amanda: So here's the bottom line of the 2018 report, the Out of Reach report. In no state, not one of them out all the 50 states, in no metropolitan area or county, can a worker earning the federal minimum wage or the prevailing state minimum wage afford a 2-bedroom rental home at fair market rent by working a standard 40-hour week. [0:10:12.1] So, if you're making minimum wage and you're only working 40 hours a week, there's no way you can afford a 2-bedroom rental home for less than 30% of your take-home pay. So as an example, in Chicago the minimum wage is $12.00 per hour, which is kind of high compared with the federal minimum wage of $7.25, so $12.00 sounds good.

Brandon: It does. It sounds bigger.

Amanda: Right. But a person in Chicago would need to make $22.69 to meet that 2-bedroom housing wage standard that this coalition creates.

Brandon: So no wonder so many families work 2-3 jobs and more than 40 hours per week here in Chicago and elsewhere.

Amanda: Right. Because Chicago is not even the worst place, and there are places that the gap there is way higher. [0:11:02.9] The metro area with the largest gap between hourly wage and the cost of, or the minimum wage and the hourly wage that you need to afford a 2-bedroom is in San Francisco, CA. It's $60.02 hourly wage to afford a 2-bedroom home, but the minimum wage there is only $15.00 per hour, and then in case you're wondering, the State of Arkansas comes in last in terms of the gap. In Arkansas, the minimum wage is $13.05 and the required wage to afford a 2-bedroom home is $13.84, so still a gap but the smallest gap, only $0.79 per hour gap.

Brandon: We should move to Arkansas.

Amanda: I think maybe everyone's that renting is going to want to move to Arkansas now.

Brandon: All this to say if you can't find a job that pays enough to cover your rent, how are you ever going to save up for a down payment or afford the mortgage payments, taxes, insurance, upkeep and related costs of owning your own home? [0:12:06.1] We believe that's the financial reason that renters are citing for why they have to rent, when they really want to buy. Their income is just too low.

Amanda: Yep. So here’s what we’re coming to. I want to share with you the opening paragraph from the Out of Reach report for 2018. The introduction was written by someone whose name 99% of Americans will know. I will let you go find the report and see who wrote this. I'm not going to tell you. Go find the report and see who wrote it. Hint: there's going to be a link in the show notes.

Brandon: So, go to the show notes.

Amanda: Go to the show notes. But here we go. Here's what this person wrote. "Every American, regardless of income, should have a fundamental right to a safe, decent, and affordable housing. Stable and affordable housing is not only essential for a person to live with dignity, but without it, economic opportunity is simply an illusion. [0:13:04.3] It is difficult for families to keep up and near impossible to get ahead or save for retirement or higher education. Without a stable home, children suffer emotionally and at school. Seniors cannot possibly retire with dignity and respect."

Brandon: We're starting this series with housing because it's the foundation of your financial world. We all need to live somewhere. If your housing costs too much, it throws off everything else. If your housing is in jeopardy, it throws off your sense of security and dignity, which in turn, puts your entire wallet on edge.

Amanda: We almost titled this episode "On the Verge of … Homelessness."

Brandon: First, there are way too many Americans homeless at this very minute.

Amanda: And secondly, there are way too many Americans that could be homeless if something happened. [0:14:01.5] You know, when housing costs are more than 30% of a person's income, that person starts living paycheck-to-paycheck in order to keep up with all the other expenses. And then one job loss, one large medical bill, one sick relative who needs caring for, one or two missed paychecks due to a government shutdown, and this person could easily become homeless so many of us are on that verge of homelessness.

Brandon: Yeah. I think that whole thing of the government shutdown was just an example to see how close people are to this verge of. Like I mean we saw people that didn't have -- they didn't even have a little bit saved up to take care of those basic expenses, even though it is a month or I don't know long the shutdown was.

Amanda: Well, I think they missed one paycheck and were close to missing a second and that, you know, that just showed -- and they were just still "go get loans," which means that the banks are going to make more money with interest. [0:15:01.8] We could go down that rabbit hole, but we're not going to. We're going to stay focused on home and the sense of home.

Brandon: So there really is a housing crisis in America, but there are glimmers of hope that Amanda promised she would give us.

Amanda: Right. There's this headline that I saw a couple of weeks ago, in January 2019. This headline gave me some hope that people with power are starting to do something about this housing crisis. Here's the headline. Microsoft will invest $500,000,000 in affordable housing in the Seattle area to address any quality caused by the tech industry.

Brandon: That's good. I mean, it is 2019. When did the tech industry start there? I don't know. Anyway.

Amanda: The 90's probably?

Brandon: Yeah.

Amanda: Or earlier?

Brandon: I'm glad they're doing something.

Amanda: Yeah.

Brandon: I saw that come across too and it was good to hear.

Amanda: Yep.

Brandon: The other thing that gives me hope is all the people who are choosing a different path than the 1500 square foot ---

Amanda: Or more.

Brandon: --- house close to work and great schools. [0:16:04.6] They’re choosing a different way.

Amanda: Yeah. Some are living in co-ops.

Brandon: Some are living in those tiny homes that Amanda loves.

Amanda: Love tiny homes. Some live at mom and dad's house to save for a down payment.

Brandon: Some use the strategy we used for many years and share an apartment with roommates. I mean at one point, Amanda and I lived
with a woman and two other guys and three cats in a 3-bedroom apartment in order to launch our first business. Now we did have the upstairs since we were the married couple.

Amanda: Yeah.

Brandon: But ---

Amanda: There were five of us in a 3-bedroom with three cats too, so.

Brandon: Yeah, exactly.

Amanda: So if you want to learn more about the housing crisis, just Google it. You'll find Huffington Post articles and other news galore. If you want to do something about it, you could decide to join with movements advocating for policy change, but our biggest suggestion, if you want to do something about the housing crisis, is this. [0:17:01.7] Decide how you will be different. How will you keep your housing cost below 30% of your income? Do you need to move to a smaller place? Do you need to have roommates? Do you need to join a co-op? Do you need to live with mom and dad for a little bit? Is there another alternative? What are you going to do to make sure you're personally not in a housing crisis?

Brandon: Does that feel impossible, based on your location or your income? If anything, know that you're not alone. Millions of other Americans are in the same predicament.

Amanda: If you'd like someone to strategize with you how you could have a sense of security and dignity in the place you call home, we would love to chat. Brandon and I have used a particular strategy we like to call grandma's strategy to save up for a down payment. Sure, we needed to sacrifice some luxuries, but we still have been able to do what’s most important to us while also saving for our forever home. [0:17:59.6] We're currently renting, but already, we have plenty ready to deploy when we decide it's time to buy.

Brandon: And we're not going to have to do that PMI insurance, I think.

Amanda: Oh, yes, right. And so this had been helpful for us. We'd love to see if we could help you do something similar. To schedule a 15-minute chat and discover if we're a good fit to work with you, all you have to do is go to grandmaswealthwisdom.com and click request a meeting.

Brandon: So, that's it. Next time, we're continuing the "On the Verge Of" series. The title is "On the Verge of Ability." We'll be talking about one of the biggest risks to your income when you're in your 30s and 40s. See if you can guess what the biggest risk is between now and the next episode.

Amanda: Until next time, keep building your wealth simply and sustainably for your own future and the future of our grandchildren's generation. [0:18:58.3]

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